You needn’t, and shouldn’t, deny yourself everything. But delaying some gratification, over stretches of time, is essential. And that requires discipline. Lots of it. So make a plan and stick to it.
There are many ways to save, and each comes with its own rules and rewards. Are your goals long or short term? How much liquidity do you require? Is inflation a concern? Knowing the advantages of different savings tools is the only way to compare and choose wisely.
Know what you want
What’s your goal? Vacation. Retirement. College. Emergencies. Be specific, it can be very motivating. Next, determine how much you’ll need, so you can choose the best way to make your money grow. An excellent savings goal is an emergency fund, for which most financial advisors recommend holding 3 to 6 months of living expenses. Be realistic with your amounts and timeframes. Otherwise, you’ll get discouraged.
Pay yourself first
People who don’t consciously save, end up spending. Which makes payroll deduction one of the best tools for struggling savers. Money is automatically taken from your paycheck and transferred to a savings account—before you can spend it. You can open savings accounts specifically for your savings goals to keep your money separate - do this deliberately to help you see your progress.
Round up your savings
Some credit cards will automatically round up debit card purchases to the nearest dollar and transfer the extra money to a savings account. Say, for example, your salad nicoise costs $18.50. Your bill would be rounded up to $19, with the extra 50 cents deposited into your savings account. You’d be surprised how, over time, even small amounts add up.
Make purchases pay and invest savings
Use a credit card that offers cash back rewards. Then, you can spend and save simultaneously. But don’t go wild. Keep your savings goals top of mind, and take care with how much you spend. If you don’t need the cash right now, consider investing some savings in Treasury bills, notes and bonds. The difference between them being the time for maturity: Treasury bills are a year or less, Treasury notes range from two to ten years, and Treasury bonds span 10 to 30 years. You can sell them before they mature if needed, though it’s risky if they are a long way from maturity.
Track your spending
Use our budgeting tool to make this easy. You’ll be surprised how much of your money gets frittered away. Eliminate this careless spending and sock that money into savings. You really won’t miss these impulse purchases, and you’ll reach your savings goals sooner.